coal bed methane

Going forward, oil and gas companies in Wyoming will need to pay more upfront to cover the potential costs of clean-up down the road.

Companies have to post a bond before they begin drilling to ensure compliance with regulations and to cover the costs of clean-up if they go bankrupt or abandon their wells. The bonds are returned once wells are properly reclaimed.

Currently, Wyoming requires a bond of $75,000 to cover all of a company’s wells in the state, although many companies were grandfathered in under a previous $25,000 requirement.

Driving around the Powder River Basin in northeast Wyoming with Jeff Gillum and Jeff Campbell is like playing an extended game of “Where’s Waldo?”

Where most people would see a yard full of heavy machinery or an unassuming patch of prairie, Campbell and Gillum are constantly spotting coal bed methane wells. They point out the signature tan well houses everywhere as we drive around Gillette: in people’s front yards, in a storage company’s parking lot, even at the end of the driving range at the golf course.

As the list of orphaned wells in Wyoming continues to grow, state regulators are looking to strengthen oil and gas bonding requirements.

Oil and gas companies are required to post bonds before they begin drilling, in order to ensure compliance with regulations during drilling and cleanup. But current bonding requirements have been criticized for failing to discourage abandonment, and for not being sufficient to cover the costs of plugging orphaned wells.

A deeply in-debt company that wanted to revive the coal bed methane industry in Wyoming had its wells seized by the state Tuesday after failing to post an overdue reclamation bond. The seizure follows years of back and forth with High Plains Gas. Wells that aren’t producing need to be bonded, in order to cover the cost of reclamation and High Plains owed almost $7 million.

The struggling coal bed methane company High Plains Gas says it will pay $7 million in overdue well bonding to the State of Wyoming. The company owns more than 3,000 wells in the Powder River Basin that the state had said it would take over and plug if the bond wasn't posted by yesterday. While the bond wasn't posted yesterday, an extension has been provided for the company.

The state has started plugging some of the thousand-plus orphaned wells in the Powder River Basin. The wells are relics of the coal-bed methane bust, when many companies went bankrupt and walked away without closing their wells. The state has taken on responsibility for plugging them, using a combination of revoked bonds and funds from a production tax.

Oil and Gas Supervisor Mark Watson says they had hoped to start plugging wells a little bit sooner, but that there were scheduling conflicts to take into account.

According to new estimates from the Governor’s office, plugging abandoned oil and gas wells in Wyoming could cost anywhere from $8 to $32 million.

The smaller figure takes into account only wells that the state knows are abandoned. The larger one includes wells owned by bankrupt methane farming company Luca Technologies and the 2300 wells the state considers ‘at risk’ for abandonment.

That number of 'at risk' wells is twice previous estimates. The Governor's policy director, Shawn Reese, says the discrepancy can be traced back to the Oil and Gas Conservation Commission.